What could your startup equity be worth?

The three numbers that decide equity value

Whatever form your startup equity takes, its eventual value comes down to three things: what fraction of the company you own at exit, what the company is worth at that exit, and what it costs you to convert your grant into shares you can sell. The first is the trickiest because it changes over time. The percentage on your offer letter is your ownership today; by the time an exit arrives, several funding rounds will have issued new shares and shrunk that slice. Modelling a realistic dilution is the single most important correction most people skip. A grant that reads as half a percent can easily be a quarter of a percent by the time it matters, halving every outcome before you even pick an exit valuation.

The second number, the exit valuation, is genuinely unknowable, which is why this tool refuses to pretend otherwise and instead shows a ladder of outcomes. A modest acquisition, a solid mid-size exit, a strong outcome, and a rare home run produce wildly different payoffs from the same stake. Seeing them side by side is sobering and useful: it reframes equity as a probability-weighted bet rather than a number you can bank. The honest expected value sits well below the home-run column, because the chance of reaching it is small.

Options, strike prices, and the cost to win

If your equity comes as stock options rather than outright shares, there is a third number that can quietly destroy value: the strike price. Options give you the right to buy shares at a fixed price, so your real gain is the exit price minus your strike, times your share count, minus what you pay to exercise. If the company exits below your strike, the options are worthless, a downside that restricted stock at a public company simply does not have. Exercising early can also trigger a tax bill on paper gains you have not yet realised in cash, the notorious alternative minimum tax trap, so the timing and cost of exercise are decisions with real money attached. The calculator subtracts the exercise cost from each scenario so the figures you see are net of what it takes to get there.

Liquidation preferences are the other hidden term worth knowing about. Investors often have the right to be paid back first, sometimes a multiple of what they put in, before common shareholders, which is you, see anything. In a modest exit those preferences can absorb most or all of the proceeds, leaving employee equity worth far less than a simple ownership-times-valuation sum suggests. This tool does not model preferences, so treat its lower scenarios as optimistic for any company that has raised heavily.

How to weigh equity in an offer decision

The practical rule that follows from all this: value the cash parts of a startup offer at face value, and treat equity as upside, not income. Base salary and bonus are guaranteed; equity is a lottery ticket whose expected value you should discount heavily for the stage and odds of the company. When you compare a startup offer against a big-company offer, put the guaranteed cash side by side first, then add a sober, dilution-and-probability-adjusted estimate of the equity rather than the headline grant. If the cash alone is competitive and you believe in the company, the equity is genuine upside on top. If you are relying on the home-run column to make the offer work, you are betting your compensation on the least likely outcome. Carry the cash side of the comparison into the offer evaluator to see where it lands against the market, and use this tool to keep the equity honest.

Frequently asked questions

How is startup equity different from RSUs at a big company?

RSUs at a public company are nearly cash: the shares are liquid and have a known market price. Startup equity, usually stock options or a percentage stake, is a bet on a future event. It has no realisable value until the company is acquired or goes public, and most startups never reach either. The headline value a recruiter quotes is the optimistic top of a wide range; the honest expected value is far lower because it must be weighted by the probability the company succeeds at all.

What is dilution and why does it matter so much?

Every time a startup raises a new funding round, it issues new shares, which shrinks the percentage everyone already holds. Over several rounds from seed to a late stage, early employees commonly see their stake diluted by anywhere from a third to well over half. Your slice of a much bigger pie can still grow in absolute value, but the percentage you own at exit is usually far smaller than the percentage on your grant letter. The calculator lets you apply an expected total dilution so the value reflects the diluted stake, not the day-one one.

What is a strike price?

With stock options you do not own shares outright; you own the right to buy them at a fixed strike price set when the option was granted. Your gain is the difference between the exit price per share and your strike, times the number of options, minus the cost to exercise. If the company exits below your strike, the options are worthless, which is the downside cash-equivalent RSUs do not have. Enter your strike and the tool subtracts the exercise cost from the gross proceeds in each scenario.

Why does the tool show a range instead of one number?

Because a single number would be a fiction. Startup outcomes are enormously skewed: a small chance of a large payoff, a large chance of zero. Showing modest, mid, strong, and home-run exit valuations forces an honest view of the spread. The most useful mental adjustment is to weight the scenarios by how likely each really is for your company's stage and traction, which usually means leaning heavily on the lower end. Equity is a meaningful upside, not a reliable salary substitute.

Is this financial advice?

No. This is an educational model to help you reason about a genuinely uncertain asset. It does not account for liquidation preferences, option pools, the specific terms of your grant, the AMT and capital-gains tax consequences of exercising, or the very real possibility of a zero outcome. Equity decisions can carry serious tax and financial risk; consult a qualified professional before exercising options or treating equity as part of your net worth.